Current Return

Current Return

The return on a bond from the coupon expressed as a percentage of the bond's market value. That is, the current return is based on what a bondholder makes from coupon payments in a given year. It is usually not expressed in the same way as the coupon rate, which is expressed as a percentage of the bond's face value. For example, if a bond's face value is $100 and it pays a 1% coupon rate per year, the annual return is $1. However, if the bond is trading for $80, the current return is expressed as $1 / $80, or 1.25%. The current return is also called the current yield.

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Current return. Current return, also called current yield, is the amount of interest you earn on a bond in any given year, expressed as a percent of the current market price.

The current return will, in most cases, not be the same as the coupon rate, or the interest rate the bond pays calculated as a percentage of its par value.

For example, if the par, or face value, of a bond is $1,000 and the coupon rate is 5%, then the interest payments, or annual income, from the bond is $50 per year. If, however, the bond is trading at $900, then that $50 annual income is actually a current return of 5.6%.

The current return does not take capital gains or losses into account, so it is not a reflection of the total return on your bond investment.